Dotcoms spend goes on despite shake down

Despite the recent spate of layoffs and reports of excessive

marketing spending in the dotcom sector, Internet-related companies

across Asia-Pacific continued to spend substantially on advertising

during the first half of this year.

Dotcoms in Hong Kong spent more than HK$400.5 million (about

US$51.4 million) in advertising during the first quarter of this

year, compared with about HK$122 million in the last quarter of

1999, representing a 229 per cent increase in ad spending.

Expenditure during the second quarter of 2000 increased steadily to an

estimated HK$466 million.

The findings by ACNielsen also illustrated a 118 per cent rise in

advertising expenditure by dotcoms in China between the first and second

quarter of 2000.

While Singapore also saw more than a 100 per cent increase in spending

during the same period, it was Malaysia's dotcoms that led the region

with a 425 per cent boost in ad spend during the same period.

The dotcom sector, which has been plagued with layoffs and company

closures, further helped fuel an overall HK$12.8 billion

advertising boom in Hong Kong during the first six months of the

year.

Industry analysts, as well as venture capitalists, have questioned the

marketing figures of dotcoms.

Consider Renren Media, which posted a net loss of HK$47.84

million for the first six months of the year. The company spent a total

of HK$30.5 million on marketing during the same period.

Meanwhile, Tom.com spent HK$74 million on marketing and

advertising during the first six months of the year.

Both companies had earlier laid off workers in an effort to cut

costs.

Since June, hundreds of employees from other prominent Hong Kong-based

portals, including nextmedia.com, appledaily.com and SCMP.com have been

laid off.

However, according to Mr Steven Yung, president of ACNielsen Media

International, with the digital economy gradually taking shape, this

spending could spell a bright outlook for the ad industry.

"Growth so far this year has been outstanding - the advertising market

in Asia-Pacific continues to outpace economic growth. In the first six

months, the Asia-Pacific market earned close to US$13 billion,

with key markets like China, South Korea, Hong Kong and Australia all

showing strong gains.

"The outlook is bright for the rest of the year. The regional economy is

on course for a steady recovery, and we expect to see more dotcom

advertising as the new economy takes shape, giving added momentum to the

industry," he said.

According to figures released by ACNielsen AdEx, the Hong Kong

advertising market grew 20 per cent to US$1.6 billion in the

first half this year.

The China market led the region with 44 per cent growth at US$4

billion, while South Korea experienced 35 per cent growth at US$2.7 billion.

Thailand was the largest market in Southeast Asia, presenting a 27 per

cent increase to US$723 million.

Mr Yung said, "The majority of spending by dotcoms has been on

traditional mainstream medium, which makes sense. Dotcoms need to

establish a brand name ... but the challenge is that with heavy spending

the dotcoms now don't have much revenue.

"The Internet is still young and this is a learning process for the

dotcoms.

Venture capitalists feel spending on brand building will be

worthwhile.

They are still learning which type of advertising works best on the

Internet ...

So there will be some mistakes along the away."

DOTCOM ADVERTISING EXPENDITURE - ACNIELSEN

Country Oct-Dec '99 Jan-Mar '00 Apr-Jun '00 Q1 '00 vs Q1 '00 vs

dollars dollars dollars Q4 '99 Q2 '00

000's 000's 000's % change % change

Hong Kong

(HKdollars ) 121,688 400,567 466,048 229.2 16.3

China (RMB) 64,220 83,389 181,682 29.8 117.9

Singapore

(Sdollars ) 5,020 12,254 25,433 144.1 107.5

Malaysia

(Rtdollars ) 549 1,622 8,513 195.4 424.8

Thailand

(Btdollars ) 127 43,821 73,170 34,404.7 67.0

Taiwan

(NTdollars ) 430,786 538,599 - 25.0 174.1